Beer INSIGHTS Seminar in 2 Weeks in NYC; A Few Seats Remain

Crescent Crown will buy 1.1 mil cases of beer (mostly Miller) and about a half mil cases of non-alcs (Dr. Pepper Seven Up) from Baton Rouge Bev Co, in deal expected to close by yr end.  Deal consolidates Miller and Coors in Baton Rouge, Louisiana.   Baton Rouge Bev Co sells Miller and Heineken,  Crescent Crown sells Coors and most other major non-AB brands.   Following this deal, Crescent Crown will sell about 10.2 mil cases of beer in Louisiana and another 3.5 mil cases of soft drinks, mainly DPSU.  That’s about half of non-AB beer biz in state.  Crescent Crown also will sell 19.7 mil cases of beer in Arizona.  In all, Crescent Crown sells 33.4 mil cases of beer and soft drinks in the 2 states.

Lookin’ like 1^st-half momentum blunted by soft Q3.  Sep taxpaid shipments by domestic brewers down 371K bbls, 2.4%, estimates Beer Inst economist Michael Uhrich.  That followed nice pop in Aug (+521K bbls) but lousy Jul (-708K bbls).  So Q3 taxpaids -560K bbls, -1.2% and down 725K bbls, 0.5% for 9 mos.  Sep imports due late this week; yr-to-date import gain thru Aug offset domestic drop, so looks like US biz still up 0.4% or so thru Sep.  But get ready for lotsa minus signs when we publish Q3 and 9-mo figures for top 6 players in next beer marketer’s INSIGHTS.

Changes   Just after AB reported very soft Q3 (STRs down 3.8%), and top brand Bud Light down mid-singles, AB announced new mktg veep Marcel Marcondes. This marks the 5^th marketing veep at AB in about 9 yrs.  But former mktg veep Jorn Soquet stays on with ABI, moves to “new global role” after “several years of invaluable service,” according to AB.  He becomes “vp marketing strategy, core brands (and beyond),” reporting to global cmo Miguel Patricio.  As part of new role, Jorn “will continue to work closely with the North American Zone.” Indeed, AB ceo João Castro Neves thanked Jorn and praised him for his work at AB, telling INSIGHTS that on Jorn’s watch Bud went from 0.8 share loss to 0.2, Michelob Ultra accelerated from 6% growth to 20% and AB invested again in media for subpremium brands with good results so far.  João did acknowledge there’s still work to do on Bud Light.  As for Marcel, he comes from global office, where he served as global veep of mktg brands and growth development platforms for last 2 yrs, also reporting to Miguel. 

AB gets another new mgt committee (MANCOM) member, Dave Taylor, who becomes vp of supply; Dave most recently served as Metal Container Corp prexy.  Two others on MANCOM, procurement veep Fued Sadala and finance veep Nelson Jamel, will get new responsibilities, with Fued taking on logistics and Nelson adding “solutions.”  Former vp of logistics and supply, Vinnie Barbosa, also moves on to global role, with focus on “special projects.”  Recall, former prexy of Labatt in Canada, Jan Craps, became head of Asia Pacific South region, replaced by Marcelo Abud.  That means AB changed 3 of 11 on its revamped mgt committee again this yr, after changing 6 of 13 last yr.  These new roles “start immediately and will be effective as of Jan 1.” 

US Dist Ct in MD dropped charges vs Republic Natl Distrib Co and 3 execs for allegedly smuggling liquor from MD to NY to avoid higher NY tax.  Charges brought in May, with feds seeking $9 mil.  RNDC pushed back hard, citing “repeated and flagrant misconduct” by US atty and fed agent.  Now it’s case dismissed. “Republic and our three employees violated no law and should never have been charged,” RNDC said in statement. “We’re certainly happy that the US Attorney in Maryland realized that fact – before the needless expenditure of more time and resources – and decided to drop the case.”

Elsewhere, atty for wine/liquor distrib Breakthru Bev’s subsidiary Reliable Churchill wrote US Dist Ct in NY last week arguing that all charges vs his clients, the distributorship and execs Charles Merinoff and Greg Baird, should be dropped.  Recall that Empire Dist filed suit vs Reliable and Charles (half-owner of Empire itself) over similar MD-to-NYC smuggling scheme.  That suit referenced the RNDC matter repeatedly. Reliable will file formal motion to dismiss, but atty wrote NY judge that Empire’s complaint “nothing more than a cynical attempt to gain unfair business advantage against Reliable and its corporate parent Breakthru Beverage Group.”  Atty lists half dozen reasons why charges should be dropped, including lack of standing, lack of specificity, statute of limitations, failure to plead properly under RICO law and more.   

After a tough Q3 for Bud Light, ABI has shut down the “Bud Light Party” ad campaign “a few weeks earlier than expected,” said AdWeek to focus on its NFL team cans.  While AB’s original January press release talked of Bud Light party ads thruout yr, AB sez it always expected to end campaign in fall.  The Party ad campaign  “has proven to be a major disappointment by failing to reverse declining sales trends,” wrote Ad Age. “It has not been one of our better campaigns and AB will agree with that,” an AB distrib told mag. “It was a disappointing campaign. If a campaign sells beer it doesn’t matter if we like it or not as long as it works. But our trends are worse and worsening so there is a lot of concern about Bud Light,” added another.  Bud Light sr director of mktg communications Lisa Weser cited “continued positive signs in brand health evolution, driven by millennials and Hispanics” with party campaign.   Party ads “helped us improve these brand attributes,” but that “did not translate to improved volume and share,” she said.   

Big news this morn looks like a win-win, but must be approved by Dept of Justice.  Constellation agreed to buy Grupo Modelo’s 3.4-mil-bbl capacity brewery in Obregon, Mexico for $600 mil, “with minimal investment and optimization by Constellation after closing,” said Constellation in release.  With this deal, it will “immediately obtain functioning brewery capacity to support its fast growing, high end Mexican beer portfolio and provides flexibility for future innovation.”  But it gets better for STZ: deal “also enables the company to become fully independent from the interim supply agreement with Grupo Modelo.”  So free at last.  As “result,” Constellation can “phase the buildout” of its Mexicali brewery, with the first 4.25 mil bbls coming online by Dec 2019.  This will increase free cash flow guidance to “a range of $575-675 million.”  Obregon is on West Coast of Mexico and “will help service Constellation’s largest beer markets in the western U.S.” 

This deal has to be especially welcome for Constellation, since supply was likely to be tight next year, INSIGHTS has heard.  For ABI, it must rankle some to further enable its strongest competitor.  However, approximately 90% of beer made at Obregon was “dedicated to production for sales by” Constellation into US, said ABI source. So Grupo Modelo did not need this brewery for its Mexican biz, especially since it will open a new 4.25-mil-bbl brewery in the Yucatan in just a few mos.  Then too, ABI will likely also be just as happy to be out of the production agreement with Constellation and it gets $600 mil.  

The 23d annual Beer Insights Seminar, at the Waldorf Astoria in New York City is coming right up.  We’ve got a reception Sunday eve November 13th and a jam-packed day Monday November 14^th, with one of our best and widest-ranging programs ever.  The lineup includes the top exec at the world’s largest brewer, ABI ceo Carlos Brito, plus the top beer execs at the #2 US brewer MillerCoors ceo Gavin Hattersley and #3 US supplier Constellation Brands Beer Division president Paul Hetterich.  We will also feature global thought-leader FIFCO ceo Ramón Mendiola Sánchez (owners of North American Breweries), plus two generations of leaders at independent craft Bell’s Brewery, founder Larry Bell and his daughter and vp Laura Bell.  Consultant Bump Williams will discuss the fast-changing retail landscape and more.  An expert panel of 3 top-notch alc bev attys will probe provocative 3-tier, trade practice and other legal issues: Marc Sorini, Mike Moses and Michael Halfacre.   Beer Marketer’s INSIGHTS president Benj Steinman will provide an industry overview.  You won’t want to miss this premiere industry event.  Sign up now. Space is limited and there aren’t many seats left.   Click here for agenda.  Click here to register.  Discounted room block available through today, Oct 28.

As articles started to appear on the internet about Yuengling owner Dick Yuengling’s unsurprising support of Donald Trump (expressed by Dick when Eric Trump visited the brewery), we included a short graf on it yesterday.  But hours later it blew up all over social media and many articles written in local and now even natl press (Washington Post, USA Today, NY Times, Fortune and Forbes for starters).  Don’t know what it will mean over time, but there’s a lot of short term noise, including: PA state rep Brian Simms, first openly gay state legislator, wrote a lengthy Facebook post criticizing Dick’s comments and called for a boycott by LBGT community, naming specific Philly accounts in “Gayborhood,” at least a couple already took him up on it; DC bar owner posted a video of himself removing Yuengling tap and saying: “When people support things that don’t support us, then we don’t support them.”  

Forbes writer, who had recently done lengthy profile of Dick, noted “with the backlash against his endorsement of Trump gaining momentum, Yuengling could be losing formerly loyal customers.”  Forbes finally reached Dick for comment and he said “he would also be happy to welcome Hillary Clinton for a tour of his brewery” but wouldn’t comment further. “I’ve said enough.”  

Touting a plan to “disrupt the Massachusetts beer wholesaler landscape by offering breweries a like-minded distribution partner,” MA craft brewer Night Shift Brewing launched Night Shift Distributing.  Night Shift started in 2012, sold 4200 bbls in 2015, according to BA stats, told Boston Globe it’s on sked for 10K bbls this yr and “plans to double production next year.”  It’s also invested $1 mil on new distrib operations, prexy Rob Burns told Globe.  Night Shift self-distributes now and hopes to pick up “as many as 25” MA and out of state brewers.  Rob is also prexy of Mass Brewers Guild, which has tried to change Mass franchise law for yrs. So as he set up new distrib co, he took many shots at existing distribs and system.

“After watching wholesalers squash brewery efforts for [franchise law] reform year after year, we finally decided – it’s time to work within the broken system to offer ourselves and our brewery friends something different,” co-founders say in release.  “The current system is anti-competitive, stifles innovation in distribution and creates a large barrier to entry for new distribution companies – we’re ready to change that.”    

Night Shift offers: 1) “complete cold-chain life-cycle” for all brews; 2) a “contract we’d sign ourselves,” ignoring “archaic franchise laws,” with option for brewers to part ways; 3) no pay to play, “illicit discounting” or “gray area” activities; 3) lab-testing, (including “right to lab test the quality of every beer” it sells); 4) “fair and equal treatment of every brand,” no sales incentives or commissions since “high quality beer will sell itself.”  In final shot to status quo and current MA distribs, Night Shift sez it will give “fellow brewers total brand control, superior beer treatment and a distribution partner that’s working to alter the direction of today’s monopolistic MA wholesaler landscape.”  Bill Kelley, prexy of Beer Distribs of Mass told Globe “we expect NSD will experience the challenges of running a multi-brand distribution business effectively…. While it’s peculiar to see this announcement being used as a vehicle to attack the very industry they are entering, we are hopeful that one day” Night Shift is successful enuf to “be considered for membership” in BDM.

Coincidentally, Kelley and Burns took part in Brewbound’s Brew Talks mtg earlier this week at Jacks Abby brewery in Framingham.  Boston alc bev atty John Connell said state getting ready to name task force of 5-7 “people of learned backgrounds” that will review MA alc bev laws “top to bottom,” from licensing to franchise law and more, Brewbound reports.   That process likely to take over a year, but Burns said MA Brewers Guild will continue to seek franchise reform, saying “there should be an exit” when distrib relationship not working.  Kelley said he’s happy to talk. “We don’t build walls. The beer distributors build brands.”